Common SaaS Misconceptions

107: Save time and thousands of dollars by avoiding common misconceptions.

Welcome reader! After a long time, we have brought another SaaS article. We avoid SaaS-related content for a simple reason. From our experience, it attracts a specific audience. A few years ago, everyone thought starting the SaaS meant easy money with little effort. Minimum work required and easy cash flow - wrong. The SaaS business model has not changed. The trend and popularity have decreased in the last year. Making it the perfect opportunity to cover common misconceptions. Not just misconceptions but things that are often not being prioritized enough. Our idea is to cover it from a different perspective. Giving you a few ideas that anyone could use to their advantage while starting your first SaaS project or working on one.

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Common Sense - Mandatory

What You Need To Know About SaaS: There is a reason for our Twitter handle. SaaS is a beautiful business model. Highly scalable, lightweight, efficient, and cost-effective. Another point in favor of SaaS is that you can run a small team without relying on multiple external factors. Dream of every business owner. For those who have more experience under the belt, you already know what we are talking about. It’s nothing more than a distribution vehicle like every other business model. It doesn’t take a genius to realize the beauty of SaaS. Over the last few years, we have witnessed multiple gurus convincing others that starting SaaS is the easiest thing in the world. Result? Multiple failed attempts by individuals to launch their own SaaS businesses failed Some of them were good. Some of them were straight-up bad. Bad in the sense that there were no use cases for them. What about the good ones? They are still operating today - which no one should be surprised by. Not only are they operating, but they are also growing each year.

Where Magic Happens - MVP: Validate before spending your money and time on it. This is where 80% of the magic happens and will dictate whether you move forward. Your goal with MVP should be to have a website and UI that look as good as possible so you can demo it to potential customers. The next step is running the ads and cold emails on it. Setting up the budget and testing the demand. No demand? You already know the answer - there is no product market fit. Meaning you are not moving forward. Zero excuses why you should not be doing this. If you are having problems with attention or interest. Save your money and time. Start working on something else. This is the best advice you can receive regarding MVP and one you will be thankful for in the long run.

Know Your Customer: Enterprise, B2C, SMB, CMS, CRM, ERP, or AI software. Different industry. Different business models. Different needs. Different required knowledge. None of these matters as long as you know who your end customer is. The next answer you should be looking for is why they are your customer. There were multiple cases when we asked someone these two simple questions just for them to ramble without saying anything. You don't know who your customers are if you can't answer it in less than two sentences and two minutes. This is important because if you don't know your ideal customer. How will you be able to target that same customer? Knowing your customers will dictate how you should target them. It will also serve as a base for how you should build up the project from the technical side. Building up the enterprise solution? Good luck doing that with limited software knowledge and on the bad framework that will be hell to update going forward. Before doing anything make sure you have well defined customer profile. The more detailed it is, the easier it will be.

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Common Misconceptions And How To Avoid Them

Reinventing The Wheel: We would argue that this is the number one reason most SaaS solutions fail. There are no reasons to bother creating something unique for your first SaaS. It's one of those traps everyone tries to push you into - similar to the lifestyle traps we covered earlier. If you can do the boring solution, do it. What do we consider boring? Anything that is a database with a nice UI. The goal you should have in mind is finding a solution that will bring the most benefits to your customer with the least complexity. That is the one angle to look at it. Big startup names and venture capital. Individuals always tell you the same thing - "build something unique". Another part of that story is that half of those startup names are playing the Venture Capital game. Being in their interest, they endorse everyone to take on big projects because they will eventually become part of their portfolio. Making it a win-win for them.

Industry and the difference between how it used to be and how things are now.

Your Industry Knowledge Doesn’t Matter: This is one of the biggest traps you could fall into when building your software. You must understand the industry you want to operate in. Inside and out. The primary drivers of the industry, consumer behavior, and where things are heading. The problem with the lack of knowledge shows once you are trying to validate the product. How do you offer customers value if you don’t know what they need to operate more efficiently? This is where those who are chasing a professional 9to5 career have leverage. The knowledge and expertise of the industry you operate in come into play. If you don’t have those or not following our blueprint. Start investing hours or find someone you can trust to care for those needs. Knowing the industry is mandatory. There is no point in building a product for it. The same goes for picking the strong sector (one willing to pay for the solution you are offering) and knowing your competitors. Those are all minimum requirements. Knowing these allows you to position yourself against the other already established players in the sector - again something you must know. How to research the competitors? Start with the G2 and Product Hunt and read the negative reviews. Doing this will give you feedback on what they are doing wrong and what you could do better.

I’ll assert that market is the most important factor in a startup’s success or failure. - Marc Andreessen

You Don’t Have To Specialize: Understand that your software is not for everyone. Your software has a defined customer profile and must be able to help with a customer's specific needs. The days of all-in-one solutions are behind us. There are more players than ever, and everyone is trying to get a piece of the pie. How to get an advantage over them? Specialize down. Accounting software is not accounting software anymore. It’s accounting software for freelancers working remotely with individuals making less than 500k yearly and handling multiple clients worldwide. That is the accounting software now. That is the positioning you should take regarding your software in the market. The generalist approach won’t get you anywhere while the specialized one will.

Product Matters More Than Marketing: Our Twitter followers already know we had a tweet exchange on this topic with Alex Becker a few months back. There are thousands of examples of how good SaaS products never got off the ground. The same thing on the other side. There are thousands of examples of how mediocre products got attention and managed to bring in solid ARR. Most of those are still operating today. Realize that for a one-man or small team - without strong financial backing or investors. Our advice is to emphasize the marketing and give it a time of day. No matter how good a product you have. How will others find it if you don’t promote it? The days of organic are often a waste if you are not already well-established or have a personal brand presence. The market is much more saturated than it was a few years ago. If you share the same feelings as the individual below. Starting and building out the software is not the right choice for you.

SaaS Is An Easy Business Model: False. One of those common misconceptions spread around quite often. SaaS is not an easy business model to run. Quite the opposite. We would say it is one of the more complex ones. You must simultaneously possess technical abilities and marketing skills - one of the hardest combinations only a few possess. Understanding the industry, market, and what competitors are doing wrong - to name a few. Software is neither quick cash nor an easy business model to run.

Taking Your Time: Ship it fast and bet on the momentum. You don’t have time and don’t take it slow. That is how you approach building the solution. Following the MVP method outlined. Getting the initial responses and building further. Two months is the maximum you should spend on building before getting feedback on your application. Don't fall for the idea that everything has to be perfect. That is a straight-up way to take six months to one year to ship the product that no one wants. The same applies to the initial user inputs - you want to be fast and work on initial inputs.

The B2B and B2C Solutions Are The Same: Building up and coding are the same - no denying. Everything else is not, from the advertising to the results and what the end user wants. B2B customers buy for straightforward reasons such as saving time, saving costs (or making money). B2C customers often buy for the same reason plus the enjoyment effect. B2B customers buy for efficiency, while B2C buys for efficiency plus enjoyment. Coming down to having better quality of life or making things easier. It is common for SaaS builders to miss that part yet their primary target is the the B2C. Not considering the most crucial part of enjoyment in their success formula. When you think about all the biggest and most successful SaaS B2C solutions - they all have enjoyment factors built in.

Thanks to VC Cafe

Leave Fundamentals To Others: Fundamentals? We could call them the basics. Landing Pages, ad swipes, Stripe link implementation. Basic operations everyone should know. You want to know how to do those if you run solo operations or a small team. The reason is simple: you want to be flexible enough to test and experiment with the simple stuff. Momentum. You used to pay someone to set up a website and change a few basics in the front end years ago. That whole process used to take days. Today there are so many resources out there you are not allowed not to know how to do this. All your competition knows those same things and uses them to their advantage. Changes in the current environment should be done within hours maximum.

Boilerplate SaaS: If you have never tried to code your solution from the ground up, you will never understand the importance of boilerplates. The same goes for marketing your products. You won't understand its practicality if you have never tried to ship MVP using boilerplates. Extra points in favor of boilerplates if your technical knowledge of the code is limited. You should use them because they save hours of sweaty work you could spend on something else. You will also be given a solid support system from their creators. Making implementing certain things much easier - hand holding you through the process. What is the problem with boilerplates? They are not scalable. You hit that wall once you load a decent number of users on it or they request a certain feature you won’t be able to implement. Looking for a solid boilerplate? Our long-term readers know we recommend SaaS Pegasus - our affiliate link.

All The Customers Are The Same: You can’t price the first few customers. Egos will tell you differently. No one will tell you that those first few should be protected at all costs. Once the MVP is done and you are playing - you need input you can count on. Those first few customers with proper care… It will give you many ideas, inputs, and problems you must handle. The customer support - success part takes time, and it’s boring. Yet having an excuse that you have better things to do with your product is ridiculous. Realize those first few are special. One of your goals should be to make them feel special - they will pay long-term dividends to you. Giving you inputs you won’t be able to obtain any other way.

During the early stages of Zoom, I personally emailed every customer who canceled our service. One customer replied to my note and accused me of sending auto-generated emails “impersonating” the CEO — he said Zoom was a dishonest company! I wrote back that the email was indeed from me, and that it wasn’t generated by one of our marketing tools. He still didn’t believe me, so I wrote back again and offered to meet him on a Zoom call right that minute to prove it was me writing the emails. - Eric Yuan

Team up With The Others: The longer you can prolong teaming up with the others and having multiple people working on the same project… The better. The same goes for sharing equity with others. If you can avoid it. Avoid it. Partnerships are often unnecessary and used as cover to take it easier. Also, partnerships give you an excuse to blame the other side if things don't work out. What used to work in the past as an excuse is not working today anymore. Back in the day, when tasks such as creating new visuals and putting them on the website used to take a day or two it made sense. Now, when everyone can access basic AI tools that can get it done in two minutes - those old rules don’t apply. Teaming up with someone with "more experience" and giving away the most valuable resources - equity. Things change down the road, and strategic partnerships make sense. However, having someone to partner you up with to create a basic landing page or run a few Facebook ads? Unnecessary.

Integrations: Necessary same as partnerships behind them. If you are not sure what we are aiming at the "login with insert social media" button is the most basic example of integration. Why do you want those? They build social proof and make your system more efficient. Security, seamless login, and trust. To name a few more important ones. Google trusts you enough to allow you to implement solutions like that? Social proof. Remember that we are humans and can’t help ourselves. If you know what you are doing with integrations, you can leverage them further by promoting them and building a reputation for your solution. Things get much more complicated and structured. When it comes to B2B integrations they have larger importance. The solution must allow the business to flow and simplify the end user's life. Switching data between the applications and having zero friction between them. It is non-negotiable. It’s a must.

More Features Equals Better Product: Another common misconception is that having millions of features is good. Quite often, the results are counterproductive: confusion from the user, more bugs, worse performance, and harder code to maintain. Overall, this makes it harder for yourself and your customer in the end. This doesn’t mean you should not listen to feedback from future customers. Yet be smart about it. Realize that all the best software is simple and that constant feature modification is not something you want.

Acquisition Matters More Than Churn: The acquisition and churn could be further simplified. Acquisitions tell you how good you are at marketing and sales. While the churn tells you how good the product you have is. The answer? You want to maximize both. It also provides guidance that if one side performs much worse than the other, it tells you where you are having the problems. Does acquisition matter more than churn? Absolutely not. If you hear someone say that - you know you are dealing with a guru. One that doesn’t know what he is talking about. They are both important for long-term sustainable products.

Running SaaS Is Cheap: There is no proper answer, but this is a common misconception. Running SaaS can be cheap, but it can also be expensive - not caused by the product itself. Maybe if you are running AWS in the back and have never run an SQL query before. What often happens is that inexperienced builders go overboard with bad marketing. Not setting up their budget and causing acquisition costs to go through the roof. Missing out on lifetime value and how much that customer will bring over their customer lifetime. Approach it smartly and don’t be your biggest enemy regarding costs.

You Have To Hire: You don't have to. Less so when you start to grow your business, and things look good without you reaching the burning point. What should you do instead? Push your project as far as possible hiring no one. It is a common misconception that has been spread for ages. One of the beauties of SaaS is the lean teams. What you want to do instead is to keep the headcount as low as possible. This way, you know what everyone is bringing to the table. In what direction you are going. Saving thousands a month on the salaries and other legal problems that hiring brings. Once you start thinking you need someone to take care of the employees and help them onboard - you know your company went too big. Less is more when it comes to hiring and teams.

Not All Marketing Is Good Marketing: A low-quality Reddit post with your link inside is anti-marketing. A low-quality cold email to your potential customer is anti-marketing. An awful blog post on your website where you tried to drive SEO is anti-marketing. The list goes further and further. You are either helping yourself or destroying yourself. If you are trying to implement something new, don’t half-ass it. The same applies to marketing and everything else related to your product.

Legal Is Hell: Sooner or later, you will hit a roadblock regarding legal. Extra points if you are from the EU - where regulations are ridiculous. Those who have never received emails from legal entities requesting you deliver certain documents won’t understand. You want to ensure you are building something that will not be legal hell down the road. Plan on running a serious business? Complying with relevant regulations is a must. Building your first SaaS, and you decided to build a mid-payment processor? You have chosen the worst possible way to pull it off. Once you take off, there are zero chances you will not be in legal problems and fines. Part of the game. Following that path, you have chosen to play the hard mode.

Summary: We tried our best to make a dry topic as practical as possible. At the end of the day, it comes down to realizing that building the software is not as easy as everyone claims. That is the biggest misconception out of all. Neither is something everyone should try building SaaS. It requires lots of work and knowledge on multiple sides. Something few can confidently say they possess. Does that mean you should not bother building one? Absolutely not. Our goal was to give you a few angles on how you should think and what steps not to take - to avoid common mistakes and misconceptions. Implementing what we mentioned here? Guaranteed way to save hours and thousands of dollars in the long run. Your best bet? Keep it simple.

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